Saylor URL: http://www.saylor.org/books Saylor.org
- Identify the uses of personal finance software.
- List the common features of personal financial software.
- Demonstrate how actual financial calculations may be accomplished using personal financial
software.- Discuss how personal financial software can assist in your personal financial decisions.
Many software products are available to help you organize your financial information to
be more useful in making financial decisions. They are designed to make the record-
keeping aspects of personal finance—the collection, classification, and sorting of
financial data—as easy as possible. The programs also are designed to produce summary
reports (e.g., income statements, cash flow statements, and balance sheets) as well as
many calculations that may be useful for various aspects of financial planning. For
example, financial planning software exists for managing education and retirement
savings, debt and mortgage repayment, and income and expense budgeting.
Collecting the Data
Most programs have designed their data input to look like a checkbook, which is what
most people use to keep personal financial records. This type of user interface is
intended to be recognizable and familiar, similar to the manual record keeping that you
already do.
When you input your checkbook data into the program, the software does the
bookkeeping—creating the journals, ledgers, adjustments, and trial balances that
generations of people have done, albeit more tediously, with parchment and quill or
with ledger paper and pencil. Most personal financial transactions happen as cash flows
through a checking account, so the checkbook becomes the primary source of data.
More and more, personal transactions are done by electronic transfer; that is, no paper
changes hands, but cash still flows to and from an account, usually a checking account.
Data for other transactions, such as income from investments or changes in investment
value, are usually received from periodic statements issued by investment managers,
such as banks where you have savings accounts; brokers or mutual fund companies that
manage investments; or employers’ retirement account statements.
Most versions of personal financial software allow you to download account information
directly from the source—your bank, broker, or employer—which saves you from
manually entering the data into the program. Aside from providing convenience,
downloading directly should eliminate human error in transferring the data.